Italy´s struggle to recover using RRP funds

Italy is receiving over €191 billion in funds from the EU from the Recovery and Resilience Facility (RRF), the biggest amount a member state receives from the nearly €800 billion fund. The RRF is established by the European Commission to support the EU states to sustainably recover from the COVID-19 crisis. In order to tap into the RRF fund, member states had to submit a national Recovery and Resilience Plan (RRP) entailing reforms and investments, which are to be completed by 2026. The focus of the national allocation of funding is set to be on climate goals and digital transition. To bring this undertaking into perspective, for Italy, the RRP is the most significant investment plan since the Marshall Plan after World War II, which brought the country a true economic miracle.

However, currently, Italy is struggling with spending money on time and keeping up with the RRF conditions and requirements. The RRF requires member states to first achieve their targets and milestones under the respective operational arrangement connected to the RRP before receiving the next instalment.

On 27th March the European Commission put out a decision to postpone the disbursement of the third instalment of the plan comprising €19 billion to properly assess if Italy met the requirements to receive the next payment of funds. According to the Ministry of Economy and Finance NADEF report of September 2022, increasing inflation and difficulties with the spending process are responsible for Italy´s slow rate of spending for its RRP. The main issue is that most investments are to be realised by the public sector, which requires a complex and hence lengthy spending procedure with calls for tenders before the actual assignment of funds. The Italian bureaucratic machinery, which is just an all too familiar Italian problem, can be seen as one of the main reasons for the delays. Procedures are simply too slow and complex to handle huge amounts of funding in a short time. Especially smaller municipalities are struggling to manage the increased budgets due to being understaffed and unprepared. A gap seems to come to show that while Italy was capable to secure huge amounts of funding from the EU, the country does not seem able to follow through with the investments. Italy has only spent just over a third of the €67 billion already received and is expected to still be €15 billion short by the end of the year. Minister for Economy and Finance Giancarlo Giorgetti is hence pushing for a one-year extension until 2027 to spend the money and complete the projects.

But not only an extension of the ultimate deadline is being discussed in Italy. Since Prime Minister Giorgia Meloni took office in October 2022, an overhaul of plans of the RRP previously set up under the Draghi government is out in the open. Meloni blames high inflation rates and the war in Ukraine for Italy becoming unable to follow through with its now ostensibly unrealistic national spending plan for the RRF. A call for more flexibility in the use of EU funding is getting loud with Meloni´s cabinet pushing to redirect some investments to REPOwerEU, which as a cohesion fund can be more easily accessed and spent until 2029. However, reopening legislation among member states is seen as problematic in securing unanimous agreement.

While Italy is seriously reassessing its investment plans, it is hoped that the RRF will enable Italy to recover and be resilient to eventually write another economic success chapter comparable to the 1950s and early 1960s and not turn into an economic disaster due to governance and political failures.

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